Next Generation Mobile Monetization

As I described in my previous blog How the Mobile Industry Will Make Money in the Future, the history of the mobile industry has involved huge and successful waves of revenue growth. Lucrative revenues from the first wave of voice and the second messaging wave have crested and are now in decline. Mobile data access has taken up much of the shortfall, comprising well over one-half of the total revenue of most MNOs. However, the crest of this third growth wave is visible on the horizon as critical industry disruptors begin to shape a new mobile world.

The question for mobile operators everywhere is, what is this fourth, or next, wave of mobile growth?

Unfortunately there is no obvious tsunami-size fourth monetization wave cresting on the horizon for mobile operators. Unlike the preceding three waves, there will be no gold rush created by a single killer app, such as voice, messaging, or data. A lot of gold still remains in the mobile business, but it is going to come from multiple sources and require some sophisticated mining techniques.

Cisco believes that there are four key strategic thrusts, or monetization areas, for operators to create new value from their mobile business.

1. Cost Optimization

While not a revenue-generating opportunity in itself, cost leadership will be a critical component in creating value for service providers. Production costs, embedded in the IT and network architectures typically make up one-third of an operator’s typical operating expenses (OpEx). In Cisco’s experience, working with our major service provider customers, we have been able to improve overall service provider OpEx efficiency by at least 10 percent. Key activities to deliver these improvements include: virtualized production architectures; next-generation mobile access; improved business agility; and, new business and operating models.

2. Pricing

Pricing has always been an important tool for mobile operators. While pricing is, in fact, the most powerful of a firm’s profit levers, it is often overlooked by managers. Key considerations in enhancing profitability through pricing include: tiered pricing and usage caps; value-based pricing; shared plans for Internet of Everything (IoE) readiness; plan rationalization and simplification; and, bundling.

3. Network-Enabled Features

Mobile operators realize that many of the assets and capabilities in their network and operations allow them not only to improve the quality of the user experience, but also to sell relevant information and services to other interested parties. Key opportunities to monetize network-enabled features include: quality of service (QoS); policy; APIs; data analytics; and, security.

4. New Solutions and Services

As the world becomes truly mobile, service providers have a unique opportunity to use their core technology and business assets to create new solutions and services to enhance their users’ experience and utility, reshape businesses and business models, and create new sources of value beyond their core access business. Potential new solutions and services that mobile operators could successfully deliver include: mobile cloud; Internet of Everything and machine-to-machine (M2M); connected vehicles; enterprise and small and medium business (SMB) solutions; OTT collaboration; and, location and data analytics solutions.

While mobile operators can derive new and incremental business value by focusing on all four of these strategic monetization opportunities, Cisco believes that the truly untapped gold lies at the heart of the mobile operators – their network. This new gold exists in the information and capabilities deep in the core network elements and infrastructure. The key to mining this new gold and creating new and lasting business value involves building, and successfully delivering, the monetization layers that lie above the network. The features/services and solution layers extract the inherent technical value from mobile networks and translate these into market-ready products and services that can be sold through different channels to the ultimate end user.

We are currently witnessing the cresting and crashing of the industry’s phenomenally successful three revenue waves. However, the new mobile world offers new sources of revenue and profitability for service providers to pursue across four key monetization categories. Mobile operators are well positioned to profit from these new opportunities. Mobility is the future, and they have strong customer franchises and brands. The biggest point of differentiation and source of new monetization lies in the valuable features and capabilities embedded in their unique core asset – the mobile network.

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